SPOKANE, WA—In support of its national growth strategy, Red Lion Hotels Corporation (RLHC) has completed an approximately $99-million transaction that includes selling a 45% ownership stake in 12 hotels wholly owned by RLHC to a joint venture and concurrently refinancing all of the company’s secured debt.
RLHC will maintain a 55% interest in RL Venture LLC, the joint venture that owns the 12 hotels, with the remaining 45 percent acquired by Shelbourne Falcon RLHC Hotel Investors LLC, an entity which is led by Shelbourne Capital LLC and includes several other institutional real estate investors. The joint venture also entered into a new $80-million mortgage loan from Capital Source, a division of Pacific Western Bank, secured by the 12 properties.
Greg Mount, president and CEO, RLHC, spoke to Hotel Business first yesterday immediately following the announcement. “It’s obviously good for us because it allows us to not only renovate these 12 core assets, it really gets them into excellent shape and in condition to compete in their proper tier. It also provides us additional capital to go out and do other transactions whether that be key money or actual joint venture acquisitions,” he said.
Three of the hotels will be renovated and converted to the company’s lifestyle, three-star Hotel RL brand. The remaining nine Red Lion Hotels and Red Lion Inn & Suites will also undergo comprehensive renovations. All 12 hotels will continue to be managed by RLHC’s wholly owned subsidiary, Red Lion Hotels Management, Inc., under an initial five-year management contract, with three five-year extensions.
Total debt and equity proceeds of the transaction are approximately $99 million, of which the joint venture will use approximately $26 million for planned renovations to the 12-hotel portfolio occurring over the next 12 -18 months. RLHC will use the additional proceeds to retire in full the company’s current outstanding secured debt with Wells Fargo Bank, with the remaining capital available to fund the company’s growth strategy.
For more comprehensive coverage, see story in the upcoming February 7 issue of Hotel Business.